Nissan North America Inc., and IBM have announced a nine-and-a-half year deal for IBM Global Services to provide information technology management and delivery services for Nissan’s operations in North America.
Part of the deal requires IBM to help Nissan develop and implement a worldwide IT management system. Nissan hopes to cut costs, as part of its “revival plan,” by contracting out its IT operations.
The move by Nissan to contract out its information services follows the parent company’s (Nissan Motor Co – Japan’s second largest automaker) announcement in October, 1999 that it would undertake a US$9.5 -billion restructuring plan to produce a leaner and more competitive company.
Phillip Maxwell, vice-president of information systems and e-business strategy with Nissan North America, said the deal with IBM will help Nissan in three critical areas.
“As part of that global review they’re looking at the way IS is done and the primary reason is cost savings,” Maxwell said.
Secondly, by partnering with IBM, Nissan will be guaranteed access to the latest technology as a lot of the legacy system portfolio the company currently has is getting rather old, Maxwell explained.
“A lot of distribution systems and financial systems are systems that have been around a long time, and a lot of them either need to have major upgrades or need to be replaced,” he said.
Finally the deal will allow Nissan to have global standardization of IT services. Previously every Nissan company had its own information service organization. In mid-1998 there was some consolidation within North America, but did not include everyone. For example Canada still had independent resources, as did the research and development centre in Michigan and a plant in Tennessee.
“Because with all the companies doing things differently [with their IT], what we found out was in reality that they were doing things differently [altogether],” Maxwell said.
Another area that Nissan is exploring as a possible partnership with IBM is in the development of the company’s e-business and e-commerce.
“We’ll be looking at that. That was not included in the contract, but we’re working on a strategy and will work with IBM on how they can be helpful to us,” Maxwell added.
Lawrence Maxwell, client solutions executive for IBM Global Services, said one of the challenges of the project is to ensure that there is good communication between IBM and Nissan.
“We need to make sure we are prepared to deliver the services that we’ve contracted for in a co-ordinated fashion and that we are meeting the needs in all their locations, in this particular contract — Canada and the US in all locations. We just need to make sure that we are providing the services in a consistent and professional manner consistent with the service levels we have contracted for,” Maxwell said.
Because IBM is a services company there is a need to provide the service at specific levels, Maxwell explained.
“For the most part what we end up taking on is the nuts and bolts provision of information technology to the end users and whether that be engineers, manufacturing, accounting or distribution, we make sure all that’s working
and that allows organizations, like Phil’s, that are still in existence to focus on the effectiveness of information technology in support of the business. Their focus changes from providing the day-to-day services to focusing on how well does the serve meet the business kind of needs,” Maxwell said.
Maxwell said with many companies going global there is a need for these companies to be competitive and effective IT operations play a crucial role.
“The information technology organization’s contribution involves in many cases cost-reduction, commonality of applications that allow speed to market or flexibility and most organizations have legacy applications that are not standard, so companies are beginning to make changes in applications to allow this kind of global flexibility. In Nissan’s case they’ve decided that their existing systems, which they created on their own, aren’t going to last in the new millennium, and they’re not going to meet their business needs, so they are going to look to replace them.”